False profits
"Due to some accounting rule changes, income trends may be more
fanciful than real."

When a skeptic says, 'Buy!'
"To determine whether to pick or pan a stock, Meyer usually starts
with the proxy statement. "I want to see that management owns a lot of
stock and has modest salaries by industry comparisons," he says. "I
also don't want to see any self-dealing or related-party transactions
where the CEO owns an airplane the company leases from him." It was in
Tyco's proxy that Meyer first became suspicious after reading that
former CEO Dennis Kozlowski received a $65,000 fee to serve on the
company's board."

Angst & Young
"It was HealthSouth's accountant. And AOL's too. E&Y says it did
nothing wrong. So why's it changing so much?"

Honey, I shrunk the profits
"Brown says that a year ago corporations were still thinking in terms
of the letter of the law, not the spirit of what they should be
doing. No more. "It's amazing where we're at, but I feel comfortable
saying I think corporations at some point are being unduly
conservative." Given the year we've been through, we might be able to
live with that."

Stingy Links: Bonds

Awaiting inflation"These veterans know that the bond market's reputation for absolute
safety is undeserved. After all, there are plenty of instances in
history where bond investors were fleeced. Investors lent money to the
US government to finance World War II at rates of 2.5% for terms of
between ten and twenty years in length. By doing so, they committed
themselves to a 2.5% return on their money on the eve of a massive
period of inflation. Those investors who held these bonds for the
duration suffered major losses as inflation ate away at their
savings."

Short memories, deep pockets
"If the American economy falls back into recession, corporate spreads
and defaults will obviously rise. The really troubling question for
investors is whether they will do so if the economy picks up and
interest rates rise to more normal levels. Either way, corporate bonds
at current spreads look expensive. And so does Russia."

Bonds away
"Investors have been rushing headlong into fixed income, but there are
plenty of pitfalls to watch out for"

Know when to yield
"Go ahead and buy your own corporate bonds, but make sure you're not
overpaying your broker"

WorldCom's bankrupt argument
"Moravus, 29, who bought 1,000 shares at face value after the WorldCom
acquisition, noted that WorldCom repeatedly said that the MCI QUIPS
had a prior claim on MCI assets relative to other WorldCom
debt. Because much of what is valuable at WorldCom appears to be at
MCI, that promise would seem to indicate that the MCI debtors would be
relatively secure even in a bankruptcy reorganization. But that isn't
how it worked out after WorldCom collapsed in a wave of accounting
fraud."

Stingy Links: Brokers

Most brokerage stock picks underperform S&P500
"The study, which analyzed data from quarterly surveys prepared by
Zacks Investment Research and published in The Wall Street Journal,
found that the average compounded quarterly return for recommended
stocks was 2.17%, with the S&P 500 performing marginally better at
2.26%. The study also found that the variability of recommended stock
returns is greater than the S&P 500."

Putting the Pump in 'Pump and Dump'
"Here's a chart showing the 35 stocks that regulators allege were the
subject of deceptive research, and the firms that peddled the research
on those stocks to unsuspecting investors. Also included is an example
of the kind of emails regulators used to build their case against each
firm. These and other emails are expected to provide ammunition for
disgruntled investors in arbitration claims and class-action
lawsuits."

When "sell" means "buy"
"According to a recent study, in 2000 and 2001, "buy" recommendations
from Wall Street analysts underperformed the market by an annualized
average of more than 7%. That, in itself, isn't news to burned
investors. But more interestingly, their "sell" recommendations
outperformed the market by an annualized average of 13.4%. In plain
terms, the stocks that analysts told people to avoid actually
outperformed the ones they were bullish about by an average of 20.5%
per year."

Wall Street's trust fund is tapped out
"How naive we were. In the just-announced global settlement, the
enforcement bodies alleged that some big banks had been paying one
another to issue positive "research" about clients. The banks didn't
admit or deny the allegations, though news accounts quoted industry
insiders acknowledging the practice."

Stingy Links: Buffett

2003 Berkshire Hathaway annual meeting
"This is not a transcript. No recording devices were allowed at the
meeting, so this is based on many hours of rapid typing, combined with
my memory (egads!). I have reorganized the content of the meeting by
subject area. All quotes are Buffett's unless otherwise noted. Words
in [brackets] are my comments or edits."

Buffett says CEOs overpaid
"'It's always invigorating,' Mr. Eisner said. 'They make things sound
very clear and very simple, which, of course, it is not.'" Humm, how
much does Eisner make?

Buffett: Do as I say, not as I did
"When Warren Buffett launched his latest campaign against excessive
CEO pay, he first anticipated an inevitable question: how has
Buffett's own record been on this issue? "Not so good," was his
answer."

Buffett hits back at Greenspan
"Warren Buffett, the billionaire investor, has unleashed a further
blistering attack on the use of derivatives by banks, arguing that the
complex financial instruments could pose significant risks for the
health of the global economy."

How to buy into Buffett on the cheap
"Warren Buffett's Berkshire Hathaway shares may be a lot cheaper than
they look. Meantime, here are two intriguing alternatives for
investing just like the legend."

Warren Buffett's profits soar
"Investment guru Warren Buffett has confirmed his legendary ability to
back the right businesses by doubling his company's profits."

Stingy Links: DRPs

On-line brokers make DRIPs easy
"A few years ago, the typical on-line brokerage customer would have
had as much use for a dividend reinvestment plan as an Avril Lavigne
fan would for a box of Perry Como records. Now, with on-line
brokerage clients evolving from frenzied speculators into prudent
investors, DRIPs are a perfect match."

Stingy Links: Derivatives

Why Freddie's mess matters
"The turmoil and shake-up at mortgage giant is raising fears of deeper
problems. Here's a guide to the central issues and concerns."

A dangerous offer
"What is Wall Street thinking? After being pummeled for selling bum
stocks to investors, the big firms are now trying to peddle arcane and
little-regulated credit-derivatives products to Main Street (yup, the
same type of stuff that Warren Buffett recently called financial
"weapons of mass destruction")."

Stingy Links: Dreman

Earnings shortage
"Euphoric profit forecasts have driven the market up far too
high--especially for Nasdaq 100 stocks. A closer look at them is
sobering. Go for value."

Quite the Contrarians
"You can see why it's cool to be contrarian: Fund manager David Dreman
tracked market opinions of experts going back to 1929, and found that
the consensus was wrong 77% of the time."

Anyone can be fooler of the world
"HG Wells came up with the idea first: invent a fancy machine, step
inside, press a few buttons and before you ask what the time is,
you're drinking tea with the ancestors."

'Time-Traveler' busted for insider trading
"But the fact is, with an initial investment of only $800, in two
weeks' time he had a portfolio valued at over $350 million. Every
trade he made capitalized on unexpected business developments, which
simply can't be pure luck."

Corporate Babble
"The first was a recall notice released by Ford, which informed the
world of potential steering problems with some of its pick-up trucks
and Expeditions. How's this for a diagnosis? "In the small number of
these vehicles in which the intermediate steering shaft yoke was not
properly installed, the result ultimately may be a disconnection of
the intermediate steering shaft from the steering gear." The Babbler
assumes that means the steering wheel has all the responsiveness of
the free-spinning ones mounted on those little kiddie cars outside of
grocery stores. But don't worry; it's only a "high-mileage durability
issue.""

A reason to be lazy this summer
"After writing a book (My Job, My Self, Routledge, 2000) that
established once and for all that we are what we do, Al Gini decided
that we work too much."

Blue food blues
"'Simply put, they're not what a potato is supposed to be.' This is
how H.J. Heinz pitched Funky Fries -- the weird chocolate-flavored and
blue-colored fries -- to the world last year."

Stingy Links: Government

Convict leasing in Alabama
"In the early decades of the 20th century, tens of thousands of
convicts -- most of them, like Mr. Cottenham, indigent black men --
were snared in a largely forgotten justice system rooted in racism and
nurtured by economic expedience. Until nearly 1930, decades after
most other Southern states had abolished similar programs, Alabama was
providing convicts to businesses hungry for hands to work in farm
fields, lumber camps, railroad construction gangs and, especially in
later years, mines. For state and local officials, the incentive was
money; many years, convict leasing was one of Alabama's largest
sources of funding."

Good money after bad
"America's Congress has voted to give the beleaguered airline industry
more than $3 billion in aid, ostensibly to help it through the war in
Iraq. But the airlines' problems predate the conflict and will
continue long after the fighting stops."

Is the tax cut for real?
"Polls suggest that only 45 percent of the public backs the tax bill
signed by President Bush, which means that a majority are against it,
indifferent, or confused. Now, we can dismiss the idea that people
don't want tax cuts. After all, if people wanted to pay taxes, we
could just make them voluntary and be done with it. They are called
taxes because people are being forced to pay for something they would
otherwise not pay for. Asking people if they want a tax cut should be
like asking if they want less mugging."

$20 bill gets a facelift
"The $20 bill got a facelift Tuesday, complete with new colors, a new
number arrangement and a new background, in the government's latest
effort to thwart counterfeiters."

Bring back the guild system?
"All of these examples of genuine exploitation amount to one of many
reasons that free-market economists hold the beliefs that they do. The
greater the scope of state activity, the greater the potential for
each pressure group to use the state apparatus for its own enrichment,
at the expense of the rest of society. Since the benefits that accrue
to such pressure groups from their political agitation are sizable and
concentrated, while their costs are dispersed and hidden, the tendency
over time is for more and more of this kind of activity to go on at
the expense of the ordinary person."

The joy of looting
"Victory celebrations are inevitable but dangerous. They rejoice in
destruction, not creation, cheer violence, not cooperation, herald the
doings of mass armies, not the creativity of individuals, and glorify
the actions of bureaucrats and politicians, not the productivity of
society and enterprise."

Liberation begins at home
"The war against Saddam was at least partly about freeing the Iraqis,
so why are Americans' right to speak their minds being trampled?"

Stingy Links: Grant

Reaching for yield
"People believe that bonds are inherently conservative. Not so. They
are conservative at a price, and these aren't the right prices."

Deflation cure sickens dollar
"The Federal Reserve is acting as if the U.S. were facing Japan-style
deflation. With the CPI up 3%, the real problem is in the other
direction."

The money printers
"Fearing Japan-style deflation Greenspan's Fed is buying Treasurys
with dollars it mints for that purpose. Bondholders and other
creditors should beware."

Stingy Links: Gross

Shaq attack
"A retired money manager who shall remain anonymous, confided to me on
his way out the door, "I still love to invest, I just grew tired of
the business of investing." Of course the considerable stack of chips
he was lugging to the cashier on the way out of the casino gave him
the luxury of such profundity, but he illuminated a valuable
distinction. Investing and the business of investing are not always
the same."

Stingy Links: Law

Justice, Tobacco, and Retroactive Law
"John Ashcroft's minions are trying to gain a new source of government
revenue by again looting U.S. tobacco companies-and further destroying
the U.S. Constitution in the process. It is not enough for the
U.S. Government to be waging war against Iraq; it must also continue
to war against Americans as well."

The $50 billion card game
"In a mammoth lawsuit, seven million stores accuse Visa and MasterCard
of ripping them off with debit cards. Can they win?"

Fat chance
"As we observe the current frenzy of lawyers preparing to sue
McDonald's and Burger King-and even suing Kraft Foods, the maker of
Oreos-for allegedly causing their clients to suffer from obesity, we
cannot help but wonder what lunatics have taken over the U.S. legal
system."

Director finds no road map on route to disclosure
"Ms. Urquhart had every intention of being an active director. Her
unsuccessful efforts to get fellow directors to address what she
considered a hornet's nest of problems at the Aldergrove, B.C.,
company took her on an odyssey well beyond the boardroom. She has
spent the past two years writing innumerable letters, making phone
calls and travelling back and forth from her home in Mississauga to
British Columbia, navigating her way through the courts and Canada's
patchwork securities regulatory system. It seems that just about
everyone wanted her to go away."

Stingy Links: Management

Executive pay: labor strikes back
"Call it the revenge of the battered shareholder. Across Corporate
America, proxy resolutions aimed at curbing CEO pay are winning
unprecedented victories. Most are sponsored by union and public
pension funds, which are capitalizing on investor ire over fat pay
packages at poorly performing companies. So far, they've scored more
than two dozen majority votes on issues such as golden parachutes and
expensing stock options, vs. two last year. "Shareholders are saying,
'I'm mad as hell and I'm not going to take it anymore,"' says
shareholder activist Nell Minow."

Firms pay taxes on fraudulent earnings
"It is unclear what real or perceived benefits managers of these firms
believed were generated by overstating earnings. Our estimates of
taxes paid on overstated earnings suggest that at least some managers
believe the value---to the firm or perhaps mainly to them
personally---of overstating earnings is substantial."

Stock options aren't the only option
"Tech companies are panicked at the FASB recommendation to drop
options, but they shouldn't be: Better incentives exist." How about a
regular cash salary?

You're fired. Here's your $16 million.
"Multimillion-dollar severance packages for lousy executives are more
than just outrageous. They also provide critical clues about a
company's board, its stock and its future."

Have they no shame?
"Their performance stank last year, yet most CEOs got paid more than
ever. Here's how they're getting away with it."

The incredible shrinking consultant
"That question is one that McKinsey, BCG, and Bain will have to
grapple with over the next few years as they try to prove to clients
that they're still relevant--and not, in the words of one West Coast
CEO, a bunch of 'beefed-up MBAs with big egos who charge a lot to tell
executives what they should already know.'"

We're (still) in the money
"Corporate scandals and falling share prices have forced companies to
rethink their executive-compensation schemes. And yet, bosses are
still being paid sums that many shareholders consider indefensible: in
America, top-level compensation actually rose last year."

Have fat cats had their day?
"British and American shareholders have begun what looks increasingly
like a sustained revolt against excessive executive pay."

High on the hog
"So, you'd think with all the investor lawsuits flying around these
days, the "heads I win, tails you lose" approach to executive pay
would be over. Well, don't bet your sagging portfolio on it--at least
not yet. While the downward spiral in stock prices prompted some
Canadian compensation committees to cut the pay of corporate
chieftains in 2002, many executives saw their compensation
increase--despite loud lobbying from securities regulators, corporate
governance advocates and outraged institutional and retail
shareholders."

National economic planning: will it fly?
"As Ludwig von Mises and Friedrich Hayek have argued, one intervention
would generate unintended consequences that would require further
intervention. Since we each see directly into our own minds alone,
politicians and bureaucrats cannot predict the complex myriad of
reactions that their plans for intervention will instigate. As people
react and adjust to government policies, and these policies become
more complex and comprehensive, we would move towards comprehensive
economic planning, socialism, and tyranny."

Getting stretched
"If you look at earnings under generally accepted accounting
principles, the S&P 500 is trading a price-to-earnings (P/E) ratio of
31.4, up from 27.5 at the end of March. Before 1998, it had never been
above 30. If you are a kind and forgiving person, you can use pro
forma earnings -- the numbers that companies post before charges for
stuff like plant closings, layoffs, and the like. On that basis, the
S&P's P/E is 19.7, a level rarely seen before the gaga years of the
late 1990s."

Can stocks defy gravity?
"That's what Wall Street wants you to believe. Don't buy it. The best
minds say the market will rise, but it won't soar."

Nobody wants you when you're down and out
"As big a drop as that was, a Standard & Poor's study of the S&P 500
found that stocks lose an average of 11.7% in the days leading up to
removal from the index (see chart). Canadian stocks weren't included
in that study. But as S&P cut more than 70 companies from the Toronto
index over the past year for failing to meet minimum listing
requirements, it wasn't unusual to see prices drop between 15% and 20%
in the two weeks around the time of deletion. A short time later, many
recouped some of their losses."

Longtime bear not changing his negative attitude
"Bubbles disappear completely. Showing graphs of different bubbles
versus their trend lines, Grantham points out that every bubble is
symmetrical. If prices rise 100 percent, 200 percent or 300 percent
over their trend, bursting the bubble ends with a retreat that goes
back to the trend line. Then it continues and goes below the trend
line."

Stingy Links: Munger

The psychology of human misjudgment
"And I came here because behavioral economics. How could economics not
be behavioral? If it isn't behavioral, what the hell is it? And I
think it's fairly clear that all reality has to respect all other
reality. If you come to inconsistencies, they have to be resolved, and
so if there's anything valid in psychology, economics has to recognize
it, and vice versa. So I think the people that are working on this
fringe between economics and psychology are absolutely right to be
there, and I think there's been plenty wrong over the years."

2003 Wesco annual meeting
"Why do people come? Partly, I'm sure out of respect for the long-term
record of compounding money at high rates. But also there's the cast
of mind that helped create the record. I'm very sympathetic to people
who share our twists of mind. If you're Warren Buffett and Charlie
Munger, you're lonely. The whole of academia, business and economics
believe a lot of things we don't believe at all, and conversely don't
believe a lot of things we do believe."

Pension plans face $225-billion shortfall
"Canada's public and private pen-sion plans are facing a collective
funding shortfall of $225-billion - an amount roughly equal to 20 per
cent of the nation's gross domestic product - new estimates com-piled
by three major benefit con-sulting firms show. Closing that funding
gap will require billions of additional dollars from plan sponsors and
perhaps employees, the research warns. It puts the extra funding
demands at 2 per cent of GDP annually over the next 15 years, provided
there are no further gains or losses."

It pays to inspect annual reports
"Next, we come to the real guts of the annual report -- the
consolidated balance sheet, statement of earnings and cash flows, plus
the all-important notes to the financial statements. Here's a brief
explanation of each"

The limits of bankruptcy
"Some say the most efficient way to bring down capacity is to allow
the industry to consolidate. With two or three giant airlines
competing to fly just about everywhere, each might be able to make a
consistent profit, they say." Humm, see Air Canada...

Tear up the earnings rule book
"Forget apples to apples. Earnings reports now compare mangos to
mandarins, making this quarter's numbers more confusing for investors
than ever. Let's look at Nortel and Qualcomm to see why."

eBay's scary stock-option specter
"First, consider the $127 million "error" in its earlier reports. Then
consider what its earnings would be if it has to expense options."

Tech trouble ahead
"Technology stocks have been cruising ahead of the market lately. But
watch out. We found four to dump--before the happy trails end."

Songs in the key of Steve
"Steve Jobs may have just created the first great legal online music
service. That's got the record biz singing his praises."

Tobacco stocks live to fight again
"Shares of "Big Mo" surged from January 2000 through mid-2002, while
the rest of the market was tanking. On Wednesday they were back in the
limelight, leaping almost 10 percent to $38.30 after a Florida appeals
court threw out a record $145 billion punitive damages award against
the industry."

Shortchanged
"The Baby Bells may have bilked consumers out of billions by inflating
the cost of their networks. Regulators seem content to overlook the
matter."

From scrap to Slinky
"The making of an old-fashioned toy from scrap metal offers a lesson
in how technological advances have helped revolutionize business. It
also illustrates some shortcomings."

3 Best Buy rivals look like better buys
"The electronics giant dwarfs its competitors. But its stock sells at
a premium, while competitors Tweeter, Ultimate Electronics and
particularly Circuit City look like deals in comparison."

Fannie's future is still bright
"A storm of controversy at sibling rival Freddie Mac has dragged down
shares of Fannie Mae. Now investors have a chance to profit."

The accidental CEO
"She was never groomed to be the boss. But Anne Mulcahy is bringing
Xerox back from the dead."

Stingy Links: Taxes

Taxpayer, beware!
"Washington will soon be taking back a good chunk of that new tax
cut. How? By using the sneakiest trap it's got: the Alternative
Minimum Tax."

Stingy Links: Trusts

Horse sense
"In today's low interest rate environment, income trusts are being
sold to risk-averse investors who are shying away from low-yielding
GICs. Many of the recent issues have been of volatile businesses that
are unsuited to the income trust structure. So once again there is a
mismatch between the risk preferences of the investing public and the
innate characteristics of many income trust investments."

Stingy Links: Value Investing

True believers in Value Investing
"In William Browne's office is a framed photo of a young Bill Gates,
sitting on an airplane reading The Intelligent Investor. That
America's richest man had been studying Browne's favorite book brings
a smile to the face of the Tweedy, Browne Global Value Fund manafer.
The book's author, legendary value investor Benjamin Graham, was once
a Tweedy, Browne client."

Strong selling point"A company's P/S ratio is simply its market value divided by total
annual revenue. A company with a low P/S ratio is experiencing one of
two types of selling: the good kind, when it moves more product to
pump up the "S," or the other kind, when investors dump its stock,
driving down the "P." Either way, if the ratio gets low enough the
stock may be a bargain, or at least worth a look."

Patient Capital Management Q1"Our long-term focus leads to low transaction costs and is tax
efficient. These benefits are very tangible and go directly to your
portfolio's bottom line return. A very low turnover strategy such as
ours is beneficial in many other ways. We do not spend much time on
the phone executing transactions. This allows us to focus on analyzing
companies and searching for value instead of monitoring the
minute-by-minute movement of stock prices. Our investment philosophy
allows us to run Patient Capital very efficiently."

Tweedy, Browne Annual
"Favorable or unfavorable historical investment results in comparison
to an index are not necessarily predictive of future comparative
investment results. In Are Short-Term Performance and Value Investing
Mutually Exclusive?, Eugene Shahan analyzed the investment performance
of seven money managers, about whom Warren Buffett wrote in his
article, The Superinvestors of Graham and Doddsville. Over long
periods of time, the seven managers significantly outperformed the
market as measured by the Dow Jones Industrial Average (the "DJIA") or
the Standard & Poor's 500 Stock Index (the "S&P 500") by between 7.7%
and 16.5% annually. (The goal of most institutional money managers is
to outperform the market by 2% to 3%.) However, for periods ranging
from 13 years to 28 years, this group of managers underperformed the
market between 7.7% and 42% of the years. Six of the seven investment
managers underperformed the market between 28% and 42% of the
years. In today's environment, they would have lost many of their
clients during their periods of underperformance. Longer term, it
would have been the wrong decision to fire any of those money
managers."

The perils of a weak dollar
"Yes, there could be a big upside. But it risks economic warfare and
`beggar thy neighbor' policies. That's political trade, not free
trade."

Painful side-effects
"While the SARS outbreak seems to have peaked outside China, its
economic effects continue to ripple across Asia and beyond."

How SARS is strangling Hong Kong
"This usually vibrant city that's so dependent on its service sector
and hundreds of thousands of small businesses is turning into a ghost
town."

Only the weak survive
"Despite various protestations that the strong dollar policy is the
same as it ever was, it's pretty clear that the Bush administration
and the Federal Reserve are happy to see the greenback's decline."

Germany's euro test
"Whatever the economic arguments for Britain's joining the euro, the
case for Germany's quitting looks stronger. The idea that Germany will
do it is, of course, the stuff of fairy tales. However, the country's
present predicament also has a fairy-tale feel, with the ECB in the
role of the wicked witch who lured Hansel and Gretel into her
gingerbread home with the aim of eating them. In the story by the
Brothers Grimm, Gretel pushes the witch into the oven. In the real
world, Germany is being roasted, and risks living unhappily ever
after."

Good Morning, Indonesia
"Indonesia has issues: separatism, terrorism, governance,
corruption. No wonder foreign investment has been fleeing the country
in recent years."

Disclaimers: Consult with a
qualified investment adviser before trading. Past performance is a
poor indicator of future performance. The information on this site,
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